Rupee settles flat at 87.50 against USD after inching close to 88 mark in intra-day trade

The rupee on Monday plunged 45 paise and moved closer to the 88 per US dollar level, weighed down by the strength of the American currency tariff concerns, but settled on a flat note at 87.50 (provisional) on suspected RBI (Reserve Bank of India) intervention.

The American currency gained in the overseas market after US President Donald Trump's announcement of a 25 per cent tariff on steel and aluminum imports, along with reciprocal tariffs targeting countries taxing US exports. The move has conjured up visions of a global trade war, with China's reciprocal duties coming into effect.

At the interbank foreign exchange, the rupee opened at 87.94 and touched an all-time intraday low of 87.95 against the American currency during the session. The local unit, however, pared the initial losses and finally settled on a flat note at 87.50 (provisional), unchanged over its previous close.

On Friday, the rupee recovered 9 paise from its all-time low level to close at 87.50 against the US dollar. The rupee touched an all-time low closing level of 87.59 against the greenback on 6 February.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.14 per cent higher at 108.18.

"The Indian rupee touched fresh record lows in early trades on weak domestic markets and a strong US dollar index. However, the rupee recovered early losses on supposed intervention by the Reserve Bank of India," said Anuj Choudhary, research analyst at Mirae Asset Sharekhan.

"Traders may take cues from inflation data from the US and India this week. USDINR spot price is expected to trade in a range of 87.25 to 87.80," Choudhary said.

Meanwhile, Brent crude, the global oil benchmark, rose 0.98 per cent to USD 75.39 per barrel in futures trade.

RBI governor Sanjay Malhotra on Saturday said market forces decide the value of rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value.

Addressing the media after the meeting of Finance Minister Nirmala Sitharaman with the Reserve Bank board, Malhotra said the central bank focuses on the value of the rupee in the medium to long term.

Forex traders said the Indian rupee is trading with a negative bias as foreign banks went on a dollar-buying spree and importers scrambled to secure dollars, as they feared further depreciation amidst global uncertainty.

In the domestic equity market, the 30-share BSE Sensex closed 548.39 points, or 0.70 per cent, higher at 77,311.80 points, while the Nifty settled up 178.35 points, or 0.76 per cent, at 23,381.60 points.

Foreign institutional investors (FIIs) offloaded equities worth Rs 470.39 crore in the capital markets on a net basis on Friday, according to exchange data.

Meanwhile, India's forex reserves rose USD 1.05 billion to USD 630.607 billion for the week ended 31 January, the RBI said on Friday. In the previous reporting week, the overall reserves had increased by USD 5.574 billion to USD 629.557 billion.